Final quarterly earnings presentation q1

© 2014 Rockwell Collins All rights reserved.

Proprietary Information

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1st Quarter FY 2014Conference Call

January 21, 2014


Proprietary Information 2

Safe Harbor Statement

This presentation contains statements, including certain projections and business trends, that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the financial condition of our customers, including bankruptcies; the health of the global economy, including potential deterioration in economic and financial market conditions; adjustments to the commercial OEM production rates and the aftermarket; the impacts of natural disasters, including operational disruption, potential supply shortages and other economic impacts; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; delays related to the award of domestic and international contracts; delays in customer programs; unanticipated impacts of sequestration and other provisions of the Budget Control Act of 2011 as modified by the Bipartisan Budget Act of 2013; the continued support for military transformation and modernization programs; potential adverse impact of oil prices on the commercial aerospace industry; the impact of terrorist events on the commercial aerospace industry; declining defense budgets resulting from budget deficits in the U.S. and abroad; changes in domestic and foreign government spending, budgetary, procurement and trade policies adverse to our businesses; market acceptance of our new and existing technologies, products and services; reliability of and customer satisfaction with our products and services; favorable outcomes on or potential cancellation or restructuring of contracts, orders or program priorities by our customers; recruitment and retention of qualified personnel; regulatory restrictions on air travel due to environmental concerns; effective negotiation of collective bargaining agreements by us and our customers; performance of our customers and subcontractors; risks inherent in development and fixed-price contracts, particularly the risk of cost overruns; risk of significant reduction to air travel or aircraft capacity beyond our forecasts; our ability to execute to our internal performance plans such as our productivity and quality improvements and cost reduction initiatives; achievement of ARINC integration and synergy plans as well as our other acquisition and related integration plans; continuing to maintain our planned effective tax rates; our ability to develop contract compliant systems and products on schedule and within anticipated cost estimates; risk of fines and penalties related to noncompliance with laws and regulations including export control and environmental regulations; risk of asset impairments; our ability to win new business and convert those orders to sales within the fiscal year in accordance with our annual operating plan; and the uncertainties of the outcome of lawsuits, claims and legal proceedings, as well as other risks and uncertainties, including but not limited to those detailed herein and from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof and the company assumes no obligation to update any forward-looking statement.



1Q FY13 1Q FY14

$132 $131

Net Income Net Income

1% decline

1Q FY13 1Q FY14

$0.94 $0.96

EPS

1Q FY13 1Q FY14 $1,062 $1,071

$1,062 $1,071

Sales

3

($ in millions except EPS amounts)1st Quarter FY 2014 Results

1% increase

2% increase

Sales

1Q FY13 1Q FY14

$63

($38)

Operating Cash Flow



(1)

CS Sales

1Q FY13 1Q FY14

$506 $521

CS Sales

4

($ in millions)

Sales$19 million Aftermarket increase: 10%

• Higher air transport retrofits• Spare parts for 787 aircraft• Increased revenue from regulatory airspace

mandates• Increased service and support

$4 million OEM growth: 1%• Higher hardware delivery rates for Boeing

787 aircraft• Partially offset by decreased deliveries at

light end of business jets

Operating EarningsIncrease in operating earnings and operating margin primarily due to higher sales

Commercial Systems

21.3%20.8%

3% increase

Operating Margins

1Q FY13 1Q FY14

$105 $111

CS Operating Earnings

6% increase

(1) Certain prior year amounts have been reclassified to the newly created Information Management Services segment.

(1)



GS Operating Earnings

1Q FY13 1Q FY14

$107 $101

GS Operating Earnings

1Q FY13 1Q FY14

$546 $532

GS Sales

5

19.6% 19.0%

($ in millions)Government Systems

SalesSales decline $14 million (3%)• Lower satellite communication and secure

communication product sales• Lower KC-46, KC-10 and CRIIS development

program sales• Lower DAGR deliveries• Partially offset by increased sales:

• Firestorm targeting systems• E-6B aircraft upgrade• International hardware programs• JTRS Manpack hardware deliveries

Sales by product category:• Avionics increase 1%• Communication Products decrease 11%• Surface Solutions increase 16%• Navigation Products decrease 19%

Operating EarningsDecrease in operating earnings and operating margin primarily due to lower sales

3% decline

6% decline

Operating Margins



1Q FY13 1Q FY14

$1 $2

IMS Operating Earnings

1Q FY13 1Q FY14

$10

$18

IMS Sales

6

($ in millions)

Sales• $6 million inorganic sales from ARINC• $2 million organic sales growth

Operating EarningsIncrease in operating earnings and operating margin due to the acquisition of ARINC

Information Management Services

11.1%10.0%

80% increase

Operating Margins

100% increase

We completed the acquisition of ARINC on December 23, 2013. 1Q FY 14 sales and earnings reflect a partial week of results for ARINC. Remaining activity relates to the Rockwell Collins’ flight services business that was previously included in Commercial Systems.



1Q FY13 1Q FY14

36 43

120 111

71 65

R & D Investment

Increase in Pre-production Engineering, Net

Customer Funded R&D

Company Funded R&D

7

$227$219

($ in millions)Research and Development

• Company-funded R&D declined as Commercial Systems development programs were completed

• Customer funded R&D declined due to development programs winding down in Government Systems

• Increased investment in pre-production engineering programs driven by:

• Boeing 737MAX• Bombardier C-Series• Global 7000/8000

21.4% 20.4%% of Sales



9/ 30/ 13 12/ 31/ 13

Cash 391$ 439$

Short-term Debt (436) (917)

Long-term Debt (563) (1,658)

Net (Debt) / Cash (608)$ (2,136)$

Equity 1,623$ 1,730$

Debt To Total Capital 38% 60%

Debt To EBITDA (1)0.9x 2.4x

($ in millions)Capital Structure Status

(1) See slide 12 for non-GAAP disclosures



1Q FY13 1Q FY14

136.8 135.3

Common Shares Outstanding

9

(shares in millions)Status of Share Repurchases

1% decrease

0.2 million shares repurchased in fiscal year 2014 first quarter

• Cost of Purchases - $17 Million• Average Cost per Share - $71.48

86 million shares repurchased since January 2002

• Cost of Purchases - $4.3 Billion

$395 million authorization remaining at the end of Q1



($ in millions)Projected FY 2014 ARINC Results

ARINC Business

Corporate Costs Total

Sales (midpoint of range for ARINC FY 2014 projection) 415$ -$ 415$

I ncome before income taxes 40$ (45)$ (5)$ Depreciation and amortization expense 45 - 45 I nterest expense - 25 25

EBITDA 85 (20) 65

Transaction and integration costs 5 15 20

EBITDA, adjusted 90$ (5)$ 85$

Total EBITDA, adjusted as a percentage of sales 20%

The Non-GAAP financial projections included in the table below for earnings before interest, taxes, depreciation, and amortization (EBITDA) and adjusted EBITDA are believed to be useful to an investor's understanding and assessment of the recently completed ARINC acquisition. The Company does not intend for the Non-GAAP information to be considered in isolation or as a substitute for the related GAAP measures. The table below explains the impact that certain non-cash depreciation and amortization charges, and certain transaction and integration expenses, are expected to have on the projected financial results for ARINC during the Company's fiscal year 2014. The ASES business is treated as discontinued operations and is therefore excluded from the table (unaudited, in millions).



Total Sales$4.95 Bil. to $5.05 Bil.

(from $4.5 Bil. to $4.6 Bil.)

Total Segment Operating Margins20% to 21%

(from 21% to 22%)

Earnings Per Share$4.35 to $4.55

(from $4.30 to $4.50)

Cash Provided by Operating Activities$600 Mil. to $700 Mil.

(from $550 Mil. to $650 Mil.)

Research & Development Investment About $950 Mil.

Capital ExpendituresAbout $160 Mil.

(from about $140 Mil.)

FY 2014 Guidance



The Non-GAAP ratio of debt to EBITDA information included on slide eight is believed to be useful to investors’ understanding and assessment of the Company’s total capital structure and liquidity. The Company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. The table below explains the debt to EBITDA calculation in more detail for the twelve-month period from October 1, 2012 through September 30, 2013 and the twelve-month period from January 1, 2013 through December 31, 2013 (unaudited, in millions):

Non-GAAP Financial Information

12 months ended

9/30/13 12/31/13

Income from continuing operations before income taxes $ 868 $ 860

Interest expense 28 34

Depreciation 124 126

Amortization of intangible assets and pre-production engineering costs 56 56

Earnings before interest, taxes, depreciation and amortization (EBITDA) $ 1,076 $ 1,076

9/30/13 12/31/13

Total debt $ 999 $ 2,575

Debt to EBITDA 0.9x 2.4x



Final quarterly earnings presentation q1

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